Saturday July 28, 2012
AirAsia acquisition ‘strategic’
PETALING JAYA: AirAsia Bhd's acquisition of Indonesia's Batavia Air is a strategic move on the part of the low-cost carrier as it will boost market share and enhance its route network, according to analysts.
“The acquisition will immediately see AirAsia's combined Indonesian market share shoot up from the current 2% to 14%, which will greatly bolster the group's overall traffic network,” OSK Research said in a report on the purchase.
“It will also significantly strengthen the group's sales distribution and agency network, which is crucial in Indonesia given the nation's low Internet penetration coverage.”
AirAsia said its unit, AirAsia Investment Ltd, and partner PT Fersindo Nusaperkasa would acquire PT Metro Batavia, the company which operates the Indonesian Batavia Air and Aero Flyer Institute, an aviation training school.
The acquisition, which is subject to regulatory approvals in Indonesia and is expected to be completed by the second quarter of 2013, will see AirAsia holding a 49% stake in Metro Batavia and Fersindo Nusaperkasa holding the 51% majority stake.
AirAsia said it would fund the acquisition with US$80mil (RM253mil) in cash.
AmResearch noted that from an earnings perspective, the acquisition looked pricey Batavia Air generates around US$2mil- US$3mil net profit per annum and the price tag of US$80mil implied a price earnings ratio of about 27 times.
However, it believed the acquisition was not entirely about the purchase of earnings but rather to accelerate AirAsia's domestic presence in Indonesia and to acquire off-balance sheet assets such as an enhanced route network and increased domestic franchise and market share.
OSK Research said pending more earnings guidance and clarity from management, it was maintaining its earnings projections for AirAsia for now, as it believed earnings would remain intact.
At the current price, AirAsia is trading at 10 times FY12 price earnings (PE) vs its peers' range of 12-15 times PE and even lower than its Thai associate's recent listing at 12 times FY12PE.
Both OSK Research and AmRe-search have reiterated their “buy” calls on AirAsia.